Edward Snowden Slams Bitcoin, Consensus Algorithms
Edward Snowden, the NSA whistleblower currently in asylum in Russia, predicts bitcoin will ultimately fail. He does, however, have long-term faith in cryptocurrency generally.
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In a fascinating, and at times dark, interview with Ben Wizner of the ACLU Speech, Privacy, and Technology Project, Snowden refers specifically to the need for a currency to be backed by a belief in its value. Fiat currency is not intrinsically worth its face value. It takes its value from the guarantee of the issuing government of its nominal worth.
The dissident argues cryptocurrencies take their value from scarcity of supply and a trust among a significant number of the population in their value. He places a greater emphasis on trust in crypto and a belief in their viability as their source of value:
“That belief is how cryptocurrencies move enormous amounts of money across the world electronically, without the involvement of banks, every single day… as long as there are people out there who want to be able to move money without banks, cryptocurrencies are likely to be valued.”
Critically, he argues that while cryptocurrency is here to stay, bitcoin itself will not last:
“One day capital-B Bitcoin will be gone.”
Lack of Fundamental Value and Poor Consensus Mechanisms
Snowden casts some doubt on cryptocurrencies, arguing their fundamental value is rather limited, though he does concede they have utility insofar as they help people skirt banking restrictions that would apply to people like himself.
But he left his main criticism for consensus mechanisms. On Bitcoin’s consensus algorithm, which he called “the original creator[‘s] global math contest”, Snowden says:
“Proof of work rewards those who can afford the most infrastructure and consume the most energy, which is destructive and slants the game in favor of the rich.”
And Proof of Stake merely:
“… tries to cut out the environmental harm by just giving up and handing the rich the reward directly, and hoping their limitless, rent-seeking greed will keep the lights on. Needless to say, new models are needed.”
Snowden spoke in March via video feed at the Blockstack event in Berlin, where he was critical of the tribal warfare that had engulfed the cryptocurrency industry. He appears rightly critical of the implementation of many crypto projects, even as he fundamentally supports them as a concept.
Snowden on Trust
Snowden’s worldview is that “everything requires trust, [but] at the same time nothing deserves it.” He sees blockchain as the technology that solves this problem, because of its trustless nature. Blockchains, to Snowden, are “boring, inefficient, and wasteful, but, if well designed, they’re practically impossible to tamper with. And in a world full of shifty bullshit, being able to prove something is true is a radical development.”
So while the outspoken whistleblower might be considered an obvious supporter and beneficiary of cryptocurrencies, he remains critical of the way they have developed.
Have your say. Do you agree with some of Snowden’s points?
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